Promoting these benefits is not entirely altruistic. Where policyholders make improvements to their health as a result of added-value services such as discounted gym membership or online nutritional and lifestyle information, it can also benefit the insurer by decreasing the risk to them.
As an example, according to Vitality Life, a member who is very engaged with their programme is 54 per cent less likely to suffer a serious illness. Similarly, they are likely to live for an average of eight years longer.
Deepak Jobanputra, deputy chief executive at Vitality Life, explains: “Changing policyholder behaviour results in fewer claims. There are also societal benefits as these individuals are less of a burden on the welfare state.”
Primary insurance
While there are clearly benefits to making the added-value services the core part of the product, not everyone is in favour of such a switch. Alan Lakey, director of CIExpert, is among those who voted no in the Protection Review poll. “My clients want to take out protection, they are not interested in the added-value benefits. As a result, these extras have never influenced me when selecting a plan,” he says.
Mr Lakey also believes they can muddy the waters for advisers. With so many different options available, factoring them into product comparisons can become tricky. This is exacerbated by the fact that, even where the provider is the same, insurers can offer very different versions of their services to policyholders.
Some insurers are also keen not to let the added-value services dominate their product propositions. For example, although Royal London’s Helping Hand service is one of the most comprehensive, its senior product development manager, Jennifer Gilchrist, says protection must remain at the forefront.
“Advisers need to focus on their clients’ financial needs. The added-value services are very important and can help someone cope in a difficult situation, but the objective should be financial protection,” she says.
“Clients want to know they can pay off the mortgage or provide for the family if they die prematurely or are seriously ill.”
Putting the added-value benefits at the core of the product potentially has financial implications too. While these services remain in the background, awareness and therefore usage remains manageable, making it possible to offer them for free.
Mr Lakey says child cover on critical illness insurance is a good example of this. He explains: “A lot of people could claim on this but they do not realise they have cover. If protection is sold on the back of the added-value services, people will use them more and the cost may have to increase.”
